Questions:
1. Are the financial statements in Exhibit 3.7 consistent with V. Dourtan assumptions in Exhibit 3.1?
2. What’s is the most relevant valuation model, APV or Present Value?
3. How are multi-currency cash flows, currency risk and political risk being taken into account in our valuation model?
4. What is the relevant cost of capital for Jersey? For R.T. Nakit? Can they be different? Why?
5. What is the Dinar (Pound) value of the joint venture R.T. Nakit (jersey)? What are the project’s value drivers?
1- The data presented on exhibit 3.7 is, indeed following some of the assumptions stated on exhibit 3.1: minimum cash level is 10% of total assets, which was proved by dividing cash by total assets, …show more content…

All the assumptions were made based on the financial statements and projections provided on the case. The calculation can be found in the Appendix.
One of the project’s main value drivers is the growth rate assumed in the Terminal Value. This perpetuity has a tremendous impact on the total value of the JV for both companies. The growth rate was assumed to be 8,5%, the Tunisian inflation rate . However, since that this rate can be too optimistic, a sensitivity analysis was performed, in order to measure the impact of variations in this rate.
The cost of capital used to discount the project’s cash flows is also an obvious driver of the total value. Since Prince and Jersey have different discount rates, the impact of variations in both costs of capital is also examined in the sensitivity analysis presented.
Lastly, the variations in project’s value for the different revenues estimates (Low, Medium, High) were also calculated.

Appendix 1: Calculations made to study depreciation, and selling& administrative costs behaviour

1985
1986
1987
1988
1989
1990
1991
Depreciation
535
818
1022
1026
1026
761
602
Selling&Administrative
326
412
511
554
601
653
708
Total
861
1230
1533
1580
1627
1414
1310 growth -
0,43
0,25
0,03
0,03
-0,13
-0,07 plus 1

1,43
1,25
1,03
1,03
0,87
0,93
product
1,52

geometric average
0,0725

Appendix 2: Calculations for Jersey’s cost of capital
To find Jersey’s cost of capital, the beta presented on